An Alternative to Unemployment
I see that about 315,000 people dropped off the unemployment roles in November. It seems that more and more people are joining the ranks of the permanently unemployed.
Then of course, there are the permanently UNDERemployed. A recent article in the NY Times displayed this title:
“For Jobless, Little Hope of Restoring Better Days”—NY Times, 12/2/11. (To read the entire article, click here.)
Fact of the matter is: It could be a very long time—if ever (relatively)—before the job situation returns to the robust days of the first decade of the new millennium. In other words, the jobs are not coming back any time soon.
By the time some of them do come back, you will be told (as many already have), “…you have been out of a job for too long and are no longer qualified.”
So, what are you going to do about such a possibly bleak future? Well, here are some basic options:
- Live off of someone else’s income indefinitely.
- Keep looking for work until your unemployment runs out, and then face the music.
- Keep looking for minimum wage jobs and then lower your standard of living to match whatever income you receive. (This also works for those already underemployed.)
- Go back to school and learn a new career. (Expensive and hard to survive financially while going to school, especially if you have a family.)
- Become an entrepreneur and start a business.
If it were me: I would become an entrepreneur and start a business—and before you stop reading, hear me out.
According to the Kauffman Foundation, 6.5 Million people are expected to start a full-time business this year—and you could be one of them! Here’s the requirements:
- You do NOT have to have some special education to become an entrepreneur.
- You do NOT have to have a lot of money to start a business. You can start many businesses with less than $100.
- You must NOT have a “fear of failure,” because you might just fail a time or two before you get everything right. That is part of the fabric of every entrepreneur—if your business fails, you simply try something else.
- You DO have to work very, very hard—likely harder than you ever worked in your life.
- You DO have a lot to learn, but there are many places to get that knowledge—you don’t have to go to school full time to get it.
If you are lazy, or expect things to be handed to you, forget all of this and continue doing whatever your doing now.
If you want to have a better life—start your own business. I suggest you start by reading some of the basic information on my website Business Solutions and Resources. This can give you some general information on starting a business and also some direction on where to go to get more.
If you think you have what it takes—give it a try.
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Facebook Ambushed
I periodically take exception to the laws and regulations the federal government throws up to thwart small businesses…but the real culprit today appears to be state and local government. Here’s just one example:
There is a small town in Central Oregon called Prineville. It is a nice little town in an idyllic setting, with a lot of nice people living there. Unfortunately, it also has an unemployment rate that hovers between 17% and 18%. So, the city and the county got together and developed an “enterprise zone” that offered industrial land with a 15-year moratorium on property taxes.
At the same time, Facebook was looking for a place to locate their new data center, and found that the Prineville location would fit their needs.
Facebook signed an agreement with the county and built the first of four large facilities—which became operational this past summer. The second building was also recently started.
Following Facebook’s lead, three other high tech companies are in the process of negotiating to build in Prineville’s “enterprise zone.” This is the way jobs are created, and it looked like Prineville was going to lick their unemployment problem.
That is…until the Oregon Dept. of Revenue decided that Facebook was a good source of money for the state. As a result, they recently declared Facebook’s data center a “utility,” and therefore it didn’t fall under the auspices of Prineville’s “enterprise zone” agreement (in Oregon the state assesses taxes on “utilities” without any involvement of cities or counties).
The annual minimum tax bill to Facebook will now be $390,000 per year. Sure, that amount is not going to break Facebook, but what does this whole scenario say to their mangagement about building the other three buildings and filling them with servers—and hiring people to run the operation. As Facebook management said in a recent email—”…the state has effectively rewritten the agreement between the county and Facebook.“
An Oregon state senator recently said, “It doesn’t make any sense to me, it’s like being ambushed.”
Worse yet, what about the other companies interested in building in the “enterprise zone?” According to an Oregon state representative; “It repels those other data centers that are circling right now.” Oregon’s reputation as a business partner is now totally shot at this point. Even written agreements cannot be trusted.
Very Important—Don’t Skip This!
Oregon lawmakers say that this move creates a much greater concern—the taxing of “intangibles,” such as brand loyalty and, what Facebook called in one of their emails, “world-wide goodwill.” Oregon does consider “intangibles” when they calculate the value of a property, and it is this value that taxes are assessed on.
This action in Oregon could certainly increase the “taxing frenzy” of other cities, counties, and states all across the U.S.
Do you think it is fair to tax brand loyalty and goodwill of Facebook? What would you think if your “intangibles” were taxed?
What is the attitude in your city, county, or state regarding support of new (or old) businesses? I would like to hear from anyone who has a comment about their local government’s attitude toward private business.
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Small Business Loans Still Declining
Small business loans are defined by the SBA as loans under $1 million dollars. The number of these small business loans have also continued their long-term decline over the first half of 2011. At the same time, loans to large and medium-size businesses increased. Unfortunately, it appears that access to money for many small businesses is still like finding the Holy Grail.
This information is from the latest Quarterly Lending Bulletin published by the SBA a few days ago.
This problem could become an even larger stumbling block to future economic growth if demand for goods and services from small businesses increases suddenly and those small businesses have no resources to expand their capabilities. Apparently no one is thinking about this possibility.
Although it is too late for many small businesses (who are gone), there are still many of those left, asking the question; “Now that the banks and big businesses are bailed out, when are small businesses going to be bailed out?”
Apparently bailouts work well, according to the latest news from The NY Times:
- Wells Fargo just posted a 21% rise in it’s third-quarter earnings—$4.1 Billion.
- Citigroup reported a third-quarter rise in earnings of 74% —$3.8 Billion. This is the seventh-straight quarterly rise in profits for Citigroup.
Couple the bank’s rise in profits with the auto industry’s rise in profits and it becomes obvious that bailouts work for big business. Too bad the government only wants to take from small business.
Could it be because there is a dearth of small business experience in Washington? Obama’s Cabinet contains the lowest number of private sector people since records started with Teddy Roosevelt (Forbes).
Worse yet–the vast majority of lawmakers in Washington are “professional bureaucrats” who wouldn’t know how to run a small business if there life depended on it.
What do you think this scenario holds for your small business?
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Small Business To Be Hit…Again!
A short time ago, Federal Reserve Chairman, Ben Bernanke said the job market was gradually improving. Since then, unemployment has increased, causing Bernanke to admit he was “stumped” (my word–Bernanke’s words were: “We don’t have a precise read…”).
It is obvious that no one in Washington has a “precise read,” because the politicians are once again looking to the small business community to pony up more taxes to pay for a bloated federal budget.
The following video clip is of a short discussion between Treasury Secretary Tim Geitner, and Representative Renee Ellmers (R-N.C.), which should cause every small business owner in America to be concerned:
(email subscribers view video on my blog)
So, why shouldn’t we increase taxes on small businesses making over $250,000 per year? That’s a lot of money to most of us. Well, other than the fact that the U.S. already has the highest corporate tax rate in the world (even higher than socialist France) here are a couple of things to consider:
- The combined federal and state corporate income tax rate averages very closely to 40 percent of corporate profit. That means that a small business owner making $250,000 for the year pays about $100,000 of their profit to federal and state governments. Of the remaining $150,000, the small business owner must pay on the principal of any loans the company has. Basically, interest is deductible–principal is not. That is why, in many cases, small business owners take home less money than many of their employees–yet they pay more taxes. And if Geitner has his way, they will pay even more.
- The second thing to consider, is where is the money going to come from to grow a small business and make more jobs? Since the banks are not loaning to small businesses, the only place the money can come from today is out of profits, that is; the reinvestment of profits. That means that of the remains from the example above, a certain portion must be reinvested back into the business before any new jobs can be created. In many cases, this means that a small business owner showing $250,000 in corporate profits on their tax return may actually be living below the poverty level…before additional taxes.
Yes, it really makes sense to increase taxes on small business owners making $250,000 in corporate profits. In other words take away the money they may normally use to create new jobs. I just love the way politicians think.
You may note that Geitner said that they had no alternative to raising taxes, because otherwise “…you have to shrink the overall size of government programs.” Duh! Regarding Geitner’s statement, here are a couple of interesting statistics:
- Federal spending has climbed from $2.89 Trillion in 2008, to $3.82 Trillion this year–almost a Trillion dollar increase.
- For those concerned about federal funds for education, please note that although the amounts have steadily increased since the Clinton years, federal funding still only accounts for 8.2 percent of overall spending on education. The other 91.8 percent is provided by state and local government.
So, once again, the politicians are trying to kill the goose that lays the golden job opportunities. With little access to capital, crippling government regulations, the looming cost of the new healthcare law, and now a new small business taxation plan taking shape, is it any wonder that small businesses are not charging full-speed ahead with expansion plans and the creation of new jobs.
On the other hand, there is very little in the mainstream media about small business activism. Is this a case where the small business community is going to just sit back and hope that things will eventually improve by themselves?
What about you?
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Profitability’s Hidden Menace
Something is happening in the U.S. that is heavily impacting productivity, driving costs ever higher, and lowering profits. This nemesis to small business is something we are all familiar with, but rarely think of in these terms. What I’m talking about here is…allergies! I guess technically it’s called allergic rhinitis (my family calls it hay fever). During the past 15 years the number of people suffering from allergies has doubled, and related medical expenses has increased 338%.
Here are some interesting statistics that may surprise you:
- In 1995, allergies resulted in 1 million missed workdays.
- In 2010, allergies will result in 6 million missed workdays—up from 4 million just 5 years ago.
- In 1995, there were 7 million doctor visits to treat allergies.
- In 2010, there will be 16 million doctor visits to treat allergies—up from 13.1 million just 5 years ago.
- In 1995, medical expenses to treat allergies was $4 Billion.
- In 2010, medical expenses to treat allergies will be $17.5 Billion—up from $6.1 Billion in 2000.
Apparently, a large contributing factor to these trends is that in North America spring arrives 10 to 14 days earlier than it did 20 years ago, resulting in a longer pollen season. Also, as average temperatures rise, they boost the proliferation of pollen-producing trees like oak and hickory. This is particularly true in the Midwest and eastern U.S. Some experts predict that, due to fossil-fuel emissions, pollen production could double by the year 2100.
Just one more thing for small business owners to deal with, and there doesn’t seem to be any clear solution. It looks like increased absenteeism and higher healthcare costs are going to be a considerable cost of doing business in the coming years. More things to make being a business owner in the U.S. even more difficult.
Any suggestions?
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Small Business Loan
A small business loan is difficult to come by in today’s climate of scarce bank financing. That means that businesses must resort to other forms of money acquisitions (along with parsimonious spending).
Some small businesses can go back again to family and friends, while others may get additional help from their outside investors. Businesses are also getting creative regarding financing by acquiring loans from vendors, employees, customers, communities, etc.
But one place for getting a small business loan that many smaller businesses are not aware of is Peer-to-Peer Lending—obtaining a loan from your peers. Peer-to-peer lending brings anonymous people together…lenders and borrowers…electronically in a double-blind auction through technology similar to the type eBay uses.
All indications are that this type of lending is growing in popularity and has helped many businesses cope with the shortage of money from banks.
Peer-to-peer loans are usually small in size—currently around $25,000 maximum—but they have been much higher in the past and will likely increase again as the economy improves.
It is also necessary to have a fairly good credit rating to get an acceptable interest rate, which can run from 6% to 35%. Some lenders have minimum credit scores, while others apparently do not.
Here are some of the more popular peer-to-peer lending sites;
Us.zopa.com (UK headquartered)
If you’re looking for a small business loan to finance the acquisition of a piece of equipment. or a special project, peer-to-peer lending might just work for you.
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My Book
Any business crisis can be managed before it becomes fatal . . . Be Your Own Turnaround Manager tells you how. Click here for more information.